Plans for the Cleveland Street mixed-use project call for apartments and retail.

CLEARWATER — A former contractor recently affiliated with a developer the city picked for a downtown redevelopment project is awaiting sentencing in federal court for a kickback scheme in South Carolina.

That was news to Clearwater city planners, who say Prospect Real Estate Group, an Orlando-area firm that will head up the Cleveland Street mixed-use project, didn't tell them about Richard Zahn's guilty plea during the bidder vetting process last month.

"It did not come up. They assumed it was common information because it was broadly known in the development community, but it wasn't common information for us," said Rod Irwin, assistant city manager for economic development.

Federal prosecutors charged Zahn with conspiring with two former South Carolina State University officials to attempt to sell property he owned. Zahn resigned as CEO from ZMG Construction, the general contractor for the Clearwater project, at the end of last year.

He pleaded guilty in February to offeringthe former chairman of the university's board of trustees a $110,000 Porsche Cayenne, while the former university police chief was offered$30,000 and a new all-terrain vehicle in exchange for their role in attempting to persuade the university to buy the land, according to the Post and Courier newspaper in Charleston, S.C.

Zahn faces up to five years in prison.

Irwin said the city has had "frank discussions" with Prospect about Zahn, but still plans to proceed with the group.

The firm had the best plan to develop the nearly 7-acre city-owned site around Prospect Lake on the eastern edge of downtown, Irwin said.

Four developers submitted proposals to develop the long-vacant site, formerly a car dealership. When city officials announced Prospect as their pick last month, they said they based their decision on the developer's track record and expertise at urban redevelopment.

Prospect submitted plans to build 240 high-end apartments and 15,000 square feet of retail space as part of the $34 million project.

The firm is developing urban sites in Orlando and Tampa.

Mark Filburn, ZMG's current CEO, said Zahn severed all ties with the company in December. His South Carolina criminal activities involved a large tract of land that Zahn owned, Filburn said.

The City Council, sitting as the Community Redevelopment Agency, will review Prospect's selection at its June 18 meeting.

Filburn said he thinks Zahn's legal woes shouldn't be held against the developer.

"I hope not. It shouldn't. He has no affiliation with any of the entities associated with that project," Filburn said.

Prospect's record of completing projects speaks for itself, said Frank Tetel, the company's vice-president of acquisitions and development.

Prospect didn't tell the city about Zahn because he wasn't part of the team anymore, Tetel said.

"That was resolved six months ago and we had put it behind us," he said.

Times researcher Natalie Watson contributed to this report. Charlie Frago can be reached at cfrago@tampabay.com or (727) 445-4159. You can follow him on Twitter @CharlieFrago. To write a letter to the editor, go to tampabay.com/letters.

This story has been amended to reflect the following correction: The Post and Courier, a Charleston, S.C. newspaper, reported that South Carolina State University's former board chairman and university police chief were to get vehicles and money from Florida developer Richard Zahn. Zahn is awaiting sentencing in that federal conspiracy case. The Times incorrectly summarized the Post and Courier article in a Wednesday story.